How strong is your supply chain?

While businesses are obviously vulnerable to the loss of major customers, they can also be badly affected by the collapse of a key supplier. Reviewing your supply chain can give piece of mind about your ongoing ability to meet your own customers’ expectations.

As highlighted in "Strength amidst uncertainty", our 2017 survey of owner managed businesses (OMBs) across the UK, one in 10 respondents plan to restructure their supply chains in the coming year. These OMBs recognise that the supply chain can be a point of vulnerability, particularly in an uncertain economic climate.

Some businesses may be concerned that their supply chain is too narrow, making them overly dependent on the ongoing health of a relatively small number of suppliers. Others may have the opposite concern, realising that they have too many suppliers. By reducing the number they might have the opportunity to strengthen key relationships and negotiate better terms, including a better price.

A change in economic or market conditions could also provide a trigger for a supply chain review. For example, some businesses may be planning to restructure their supply chain due to the fall in the value of Sterling following the Brexit referendum. Although helpful to exporters, the weak pound has increased the cost of imported goods for many UK businesses and some may be looking for better deals, potentially even from UK suppliers.

Time for a health check?

Whether conducting a complete supply chain review, considering entering into business with new suppliers or seeking improved terms with existing suppliers, it’s vital to do a health check on the companies involved. If your supplier lets you down, you will almost certainly let down your own customers. Reliable suppliers should have strong balance sheets and cash flow and a track record of meeting commitments. A history of county court judgments would be an obvious red flag of potential problems.

Once you have established a supply chain that meets your requirements, it’s important to look out for any changes in circumstances – such as any fall in the quality of goods or services supplied, or any pattern of late order fulfilment. Substantial redundancies reported in the trade news should also be seen as a warning sign.

If you’re uncertain whether your supply chain is as resilient as it could be, Moore Stephens can help. We can conduct a review and highlight any weak points or potential risks. If there are any potential problems, it’s far better to take action early to protect your own business interests and those of your own customers.